Turkey’s President Recep Tayyip Erdogan, in another bid to lower interest rates, sacked the head of the Central Bank of the Republic of Turkey over the weekend, sending the Turkish lira south by 15% to near its all-time low on Monday, March 22. The new central banker is Sahap Kavcioglu, a former banker and former lawmaker with the ruling AKP party. Speaking to business leaders on March 21, Kavcioglu said he planned no immediate policy change. Kavcioglu replaced Naci Agbal, who had just been appointed by President Erdogan at the end of last year. According to Greek daily Kathimerini, Agbal had just increased rates by 200 basis points and had been planning another rate hike to stem the double digit inflation.
The lira dropped as low as 8.4850 versus the dollar, from 7.2185 on Friday, March 19, back to levels touched in early November when it reached an intraday record of 8.58. Turkish bonds also nosedived. If there are rate cuts, both the lira and Turkish assets are expected to plunge in value, which could very well cause a major crisis. The next policy meeting of the Central Bank is on April 15.
